Value Innovation The Strategic Logic of High Growth

1. Value InnovationThe Strategic Logic of High Growth Presented by Icebreak team 2006 3.23

2. Value Innovation • Introduction: a case • Conventional logic and value innovation logic • Application of value innovation • The fields to apply value innovation • Face of rival’s imitation • Conclusion

3. Introduction What separates high-growth companies from others? • The way to approach strategy • The companies’ fundamental, implicit assumptions about strategy • Staying ahead of competition vs Making competitor irrelevant

4. A Case: Kinepolis Background: • The business was shrinking • The competition was getting more fierce • A lot of cinemas were forced to shut down

5. A Case: Kinepolis Kinepolis’ performance • Win 50% of the market in Brussels in the first year • Expand the market by about 40%

6. A Case: Kinepolis The approach other companies adopted: • Turn the cinemas into multiplexes with ten screens • Broad film offerings • Expand food and drink services • Increase showing times

7. A Case: Kinepolis Kinepolis’ Strategy • Have up to 700 seats in a room, and no legroom • Install over-sized seats with individual armrests • Design a steep slop in the floor • Have a screen of 29 meters by 10 meters • Locate off the ring road circling Brussels • Have a large well-lit lots where patrons can park for free

8. Differences Between Two Strategic Logics

9. Value Innovation

10. Application Of Value Innovation Logic Four questions to ask: • Which factors that our industry has taken for granted? • Which factors should be reduced well below the industry’s standard? • Which factors should be raised well above the industry’s standard? • Which factors should be created that the industry has never offered?

11. Consider The Case of Accor.

12. Face of Rival’s Imitation What may happen once a company has created a new value curve? • Rival’s imitation • Growth and profits under attack • Fall into the trap of conventional strategic logic • Performance just like the rivals

13. Face of Rival’s Imitation How to avoid the trap? • View the value curve in a dynamic way • Monitor the value curve • Accumulate the differences

14. The Platforms to Apply Value Innovation • Product • Service • Delivery

15. Conclusions • The difference between a high-profit company and others lies in value innovation • Senior executives must ask four questions when to create a new value curve: which to eliminate, which to reduce, which raise and which to create • Value innovation is the simultaneous pursuit of radically superior value for buyers and lower costs for companies • We can pursuit it in the three fields: product, service and delivery

16. Resource Barriers and Sustained Competitive Advantage Presented by icebreak team 2006 3.23

17. Resource barrier All assets controlled by a firm which can enable the firm to conceive of and implement strategies to improve efficiency and effectiveness. It can be divided into three parts: physical capital resource, human capital resource and organizational capital resource. What’s resource? What’s sustained competitive advantage? A firm is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy.

18. Resource barrier Two assumptions Firm resource heterogeneity The firms may be heterogeneous with respect to the strategic resources they control. Firm resource immobility Resource may be perfectly mobile across firms, and thus heterogeneity can be long lasting.

19. Resource barrier Functions

20. Resource barrier

21. Resource Barriers and Sustained Competitive Advantage theory Sustained Competitive advantage

22. Resource Barriers and Sustained Competitive Advantage A method

23. Thanks